ACT's shopping front

Daniel Morrissey

Canberra has had its biggest increase in quarterly retail sales in more than a decade as prices across the country fell sharply, thanks to the strong Australian dollar making imports cheaper and discounting by retailers to entice cautious consumers.

Restaurants and cafes were the big winners in March, with Canberrans spending as much on dining out, cappuccinos and catering as they did at department stores, and perhaps reflecting recent research that Canberra has the highest standard of living in Australia.

The surprise strength in retail sales was in contrast to the dour picture painted by the retail lobby of weak consumer confidence and reduced trade before the Reserve Bank slashed interest rates last week by half a percentage point, its biggest cut since the 2008-09 global financial crisis.

Retail sales in the ACT jumped 1.5 per cent in March, on the previous month, for the biggest rise among states and territories, the Australian Bureau of Statistics said. National retail sales rose 0.9 per cent in March, the strongest gain in a year, and beating forecasts for a 0.2 per cent advance.

Adjusted for inflation, retail sales for the March quarter in the ACT surged 4.5 per cent on the previous quarter, the sharpest rise since the 2000 December quarter. National retail sales for the quarter rose 1.8 per cent, trumping forecasts of 0.4 per cent, and largest jump since June 2009.

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ACT Chamber of Commerce and Industry chief executive Chris Peters welcomed the bounce in the territory's retail sales from being equal worst with NSW in February to being No. 1 in March.

''I'm very pleasantly surprised at this turnaround,'' Mr Peters said. ''It must mean that consumers in Canberra are feeling a little more confident about their future.''

ACT Treasurer Andrew Barr said while previous retail sales had not been overly robust and the March figures pointed to a possible recovery in sales, tonight's federal budget still posed risks. ''With the federal government contracting, the ACT economy will be under some pressure,'' Mr Barr said.

CommSec chief economist Craig James said retail prices in the March quarter experienced their biggest fall - 0.9 per cent quarter-on-quarter - in almost three decades of ABS records. ''A stronger Australian dollar, cheaper food, ongoing innovation in technology goods, strong global competition and good old-fashioned discounting have prompted Aussies to part with their cash again,'' Mr James said.

''Although it is positive that price cuts generated a pick-up in demand, in contrast to previous efforts that seemed to yield little response, it implies that the gains are coming at least partially through sacrificed earnings margins,'' Mr Hassan said.

''Hence the 'pay-off' in terms of profits and prospective employment and investment in the sector will be less impressive.''

Business sentiment remained subdued, with the National Australia Bank's confidence index nudging up in April but still below its long-term average, while the business conditions index declined.

''[The slip in business conditions] may well mean that employment growth will weaken further in the face of poorer activity outcomes,'' the bank said. ''Forward indicators of demand were fairly lacklustre, with capacity utilisation falling to its lowest level since mid 2009.''